 "Life Insurance CEOs, BFSI")
The consensus view of the Life Insurance CEO panel at the Business Standard BFSI Insight Summit on Tuesday is that life insurance remains a sunrise sector in India, characterised by low penetration, a large protection and pension gap, and massive growth opportunities in the coming decade.
This sentiment aligns with the Insurance Regulatory and Development Authority of India’s (Irdai’s) goal of achieving 100 per cent insurance coverage in the country by 2047, setting the life insurance industry on a path of rapid growth.
“The industry is ready to meet the Irdai challenge of providing insurance to all by 2047. Numerous regulatory reforms have been implemented, and companies have initiated efforts to address three key issues: availability, affordability, and accessibility, which have previously hindered growth. The industry’s primary focus is to offer insurance to every insurable individual in the country,” said R Doraiswamy, managing director (MD), Life Insurance Corporation of India.
“Life insurance is highly underpenetrated in the country compared to other banking, financial services and insurance products, such as banking or mutual funds (MFs). India’s protection gap is substantial, standing at around 83 per cent, with an estimated underprotection of life worth approximately $16.5 trillion. Moreover, only a fraction of Indians have pension coverage, resulting in a total pension gap estimated to reach Rs 55 trillion by 2050. These factors present huge growth opportunities for us in the coming decade,” emphasised Mahesh Balasubramanian, MD of Kotak Mahindra Life Insurance Company.
“The sum assured to gross domestic product ratio in India is one of the lowest in the world at around 25 per cent, in contrast to upwards of 100 per cent in most comparable markets. With the current regulatory support and encouragement from authorities to accelerate growth and increase penetration, the life insurance industry is poised for take-off,” added Naveen Tahilyani, MD and chief executive officer (CEO) of Tata AIA Life Insurance Company.
Tahilyani also pointed out that the private life insurance sector in India lags seven to eight years behind the private sector banking space but has the potential to replicate its success in due course.
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“The total capital deployed in the life insurance industry currently stands at around Rs 1.2 trillion. In the private sector banking sector alone, the capital employed is of far higher magnitude.”
This capital gap alone highlights the growth opportunities available in the life insurance industry over the next 10-15 years, according to Tahilyani.
Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance, pointed out that the Indian life industry is in a favourable position as it fulfils essential societal needs without product substitutes.
“The industry addresses critical societal needs, which include life protection and credit protection. It also provides investment and retirement solutions to individuals and their families. Currently, there is no substitute product available in any other industry. As per capita income in India increases, and various demographic segments emerge, the need for life insurance products and various forms of protection that we provide will become even more evident.”
Vibha Padalkar, MD and CEO of HDFC Life Insurance Company, stressed that the life insurance industry should focus on increasing penetration, especially in rural areas and among women.
“Life insurance penetration in rural areas, currently at around 5 per cent, is one-sixth of that in urban India, where penetration stands at around 30 per cent. Additionally, only 9 per cent of women are covered, compared to 18 per cent of men. This represents a substantial growth opportunity for the industry.”
The CEOs also unanimously expressed readiness to seize this growth opportunity.
Padalkar stated, “We have made significant progress with 2.7 million agents and over 11,000 branches spread across the country. Presently, there is no region or district where the industry is not collectively present.”
The industry leaders also asserted that the lack of capital is not a challenge for the industry.
Tahilyani explained, “There is no dearth of capital in the industry, and raising additional capital, whether from promoters or capital markets, is not an impediment. The real challenge lies in using capital to raise awareness among consumers and increase product penetration.”
They also advocated that the life insurance industry should draw inspiration from the MF industry in terms of marketing and diversifying its product offerings to enhance penetration.
The industry leaders also supported the idea of allowing life insurance companies to offer health insurance products.
Bagchi stated, “Health is the bridge between life and mortality. Therefore, health insurance aligns well with life insurance products.”
The CEOs believe that granting regulatory permission for life insurance companies to sell health insurance will enhance underwriting in the industry, reduce misselling, and elevate protection levels, ultimately benefiting consumers.
Padalkar highlighted, “Currently, if someone succumbs to a major illness, the nominee must file multiple claims with health insurance, life insurance, and general insurance companies. In contrast, allowing one consolidated claim would be much more consumer-friendly."
